Lace up. This is about a story as volatile as Westbrook’s jumpshot. As someone who was one of the earliest beta users of NBA Top Shot and a top 50 account for a while, I’ve experienced quite the rollercoaster ride. This is a reflection about my experience and many learnings throughout this journey. You might even pick up a thing or two from my closing takeaways section that can be relevant for current and future projects too.

Few examples are as effective as NBA Top Shot in highlighting the good, the bad, and the ugly of relying on a centralized approach to scale a crypto consumer product to the mainstream.

Despite its missteps along the way, Top Shot is one of the most successful crypto consumer products the space has seen thus far. Disagree? Here’s how Top Shot measures up vs the field all-time.

Contextualizing Top Shot vs incumbents

First, I want to denote the distinction between new age digital cards platforms vs physical card players. What is the best way to think of Top Shot, Dapper Lab’s OG Flow project? Borrowing the dependency spectrum from Derek’s excellent piece on Storing Value in Digital Objects, I’ve placed Top Shot on the product/service side below.

Though one can make the argument physical cards can be stores of value, digital collectibles like Top Shots are more influenced by external dependencies (Dapper, Flow, etc). For example, Dapper has the authority to change the rules of gamification and utility of moments how they please (burn, lock, points accrued, challenges, etc). The cheaper a moment is the more reliant it is on external dependencies (represents majority of Top Shot moments). On the flip side, as you scale up to higher value & more scarce moments, those exhibit some Store of Value characteristics and function as a hybrid of sorts. Ultimately, the success of Top Shot is ride or die with its parent company, Dapper.

Grasping the value prop

As a lifelong NBA fan, you could imagine how excited I was when I first found that Dapper was working with the NBA to create digital collectibles. The NBA is a globally recognized brand consistently on the cutting edge with tech experimentation. When Benny tweeted out in Feb. 2020 to gauge interest in the prototypes, I knew I had to look into it in more detail.

The appeal of Top Shot differs on who you ask. For some, it’s a StockX for digital collectibles. For others it’s a social product, an entry into a community of like-minded basketball enthusiasts where folks bond over shared experiences like collecting moments and watching the NBA.

It is financialized fandom with verifiable ownership, transparency, liquidity, and trade settlement all under one roof with reduced barriers to entry.

Digital moments are superior to physical cards in that they unlock portable fandom. There’s no need to worry about condition, grading, shipping, and authenticity. Top Shot NFTs are easier to design experiences around (token-gated events, loyalty scoring, etc).

Which was smoother? Onboarding or Ray Allen’s jumpshot?

Top Shot’s secret sauce was in executing a simple onboarding experience for non-crypto natives onto its platform. Little to no mention at all of crypto, NFTs, gas, or blockchain. As a refresher, I re-visited the site just now to see what the onboarding experience feels like for new users. Enter email, set password, add CC details, and buy moment. That’s it. <1 minute.

However with centralized systems, tradeoffs are made and only under platform duress do you often see the negative consequences emerge (more on this soon 👀).

Calm before the storm

Despite so few users in Summer ‘21, it was still hard to purchase limited edition Legendary packs in the primary market. Many collectors were already doing the mental math around the scarcity of the season 1 moments in relation to the size of the NBA fanbase and card collectors market.

There were days where $1k volume was something to celebrate so luckily the secondary market was quite ripe with opportunity. Affordable secondary entry across all tiers truly enabled basketball enthusiasts to collect what they resonated with. Pack drops and ripping packs were a delightful experience at the time. My strategy was fairly simple. Focus mainly on the top blue chip players’ moments (Lebron, Luka, etc) and those that may be blue chips in the future (Rising stars like Ja).

Permission to full send

Remember how I mentioned how seamless the onboarding process was? As Top Shot garnered interest, many non-crypto native users starting joining in droves thanks to the easy on-ramp and their pivotal first touches with the product were seamless. Catalysts like Jonathan Bale’s article on his $35k Ja Morant Cosmic purchase, struck a cord with a ton of folks from the gambling/fantasy sports world.

NBA players like Josh Hart were hopping in on YouTube streams, interacting with the community and ripping packs together. For a brief moment, crypto had finally broken out of our crypto twitter echo chamber. From appearances on national media to being touted as the future of the digital frontier, Top Shot began dominating attention airwaves and the meta.

We also had the now infamous and arguably most lopsided NFT trade in history with Pranksy’s swap of Top Shot moments for 5 of Beanie’s punks. In fairness to Beanie, he’s crushed NFTs otherwise.

Everyone wanted in. When every pack felt +EV, what could go wrong? It was the type of euphoric market where Dapper could have a snuck in a Kwame Brown rare moment and someone would have dropped $5k for it...

The Unwind

In the upswing, the makeup of NBA Top Shot’s userbase had shifted gears rapidly from basketball enthusiasts and card collectors to largely all kinds of speculators who wanted an easy way to make money. Pack drops went from a once cherished event to miserable lines of 50k+ in pack queues, making Black Thursday lines look weak in comparison. Odds of getting a randomized draw for a pack kept dwindling and frustration began boiling over.

It was noticeable that there were scaling issues and throughout the whole time, Dapper Labs continued to full-court press and meet this abnormal wave of demand with pack drop after pack drop. As supply flooded the market and began to exceed demand, flippers started going into the red and demand began to rapidly dissipate. As quickly as demand shows up, it can disappear. Classic case of reflexivity.

With a centralized company and decision making process, an edge over decentralized protocols is the ability to react more quickly but I like to view centralized decision making as being on leverage. It’s far easier to make big adjustments but one wrong step and it amplifies the problem by an order of magnitude.

Now for the fun part. Let’s take a look at the updated graphic below. Think of Dapper Labs as the puppeteer behind Top Shot, playing God. As folks headed for the exits, it was time to slow the social media pushes, pull the “We’re still in beta” card, and start pulling some strings.

The most frustrating experience for me was the imposed “Marketplace cooldowns” which made an already cumbersome trading experience even slower. The collapse in value of moments couldn’t even happen naturally. At the extreme ends, there were also instances of de-platforming and operational headaches from cases like multi-account fraud.

For some, learning about needing to KYC to withdraw was a surprise. Others were frustrated by the inability withdraw funds in a timely manner. Easy to get in, hard to get out is a classic tactic where you bring in as many users and liquidity as possible and keep money sloshing around in-platform.

Taking a step back, we can see demand has fallen off a cliff with monthly volumes of $2-3m. I’d argue Top Shot almost hit the spotlight too early in its lifecycle, not to mention the macro environment at the time. The broader physical card market has not escaped the bear market either. Even Sorare NBA in the fantasy sports world is running into some issues balancing its economy.

Dapper’s outsized role as a decision maker and simultaneous dismal of concerns from the community only amplified issues. To be fair, it’s also a massive scaling issue whenever facing unprecedented growth early. An encouraging sign is that although the # monthly unique buyers is down bad from peak, at 11.5k it’s still significantly higher than most crypto products today even without a token to fuel speculative growth and this is more representative of an organic userbase.

Silver lining - future of fandom

Top Shot paved the way for the digital sports collectibles category with Panini and Topps opening up to it afterwards. It gave various sports leagues and other brands a sneak peak on how to better engage with their audiences. This shift from physical to digital cards/moments has led to a collapse in time to production. The rise of digital collectibles will continue as the secular trend is digital first → leading to networked products. Digital first is the wedge but also given that it’s “on-the-go”, this presents layup opportunities for bridging with IRL utility like bringing fan to games, access to players, and exclusive token-gated events.

Nuance aside, let’s walkthrough a hypothetical example of mine illustrating the potential of Top Shot:

• Tapping into my crystal ball, let’s say it’s game 7 with the #8 seed Lakers playing the #1 Nuggets on the road. Lebron hits a game-winning LeFuckYou three at the buzzer to pull off the historic upset.

• Since it’s infinitely easier to produce natively digital assets vs physical, Top Shot can near instantly monetize off of this at a time where fan attention is near its peak while also rewarding loyal fans based on fandom scores.

• Within a 24 hour period, Top Shot could then produce a limited edition (count 299) moment of the shot. Airdrop 15% of the supply to fans with the highest collector score in locked Lebron moments and distribute the rest via the randomized pack queue and sale. Just like that, a shot memorialized in NBA history would have a real-time valuation and act as a currency of fandom.

Now take into account that there’s a much larger combination of moments that can be created with players x highlights instead of the old model of player cards. You can see the double-edged sword that this scalable business model presents.

Takeaways and learnings to be mindful of

Closing thoughts

I’ve had my laundry list of frustrations with Top Shot. At times, it felt like a part-time job trying to sell out of a majority of my moments. I’ve locked a bunch of the remaining ones as a NBA fan. It was one of my early big wins in the NFT space although I should’ve timed selling much better in hindsight. I’m not really interested in participating in the day to day like trade tickets and challenges but I’m still keen on the collectibles aspect, new mobile focus, and increased amount of IRL perks being introduced.

Sure metrics are down but the product experience continues to get better. Communication underpins almost everything in this space and what was once a weakness for Dapper has been steadily improved upon.

Looking back on the last few years, Dapper’s impact in onboarding the masses into NFTs can’t be understated. Much of the TS community eventually discovered other ecosystems like Ethereum too and the rest was history.

In an industry that struggles to attract retail users without the promise of a token and/or ludicrous token incentives, it was refreshing to see Dapper :

• 1) build a kickass product experience for retail superior to the status quo card market

• 2) work towards enabling net new behaviors thanks to opening up the D2C of the NBA to fans

I hope this piece raises awareness about the perils of centralization. How does that saying go? Nobody cares about decentralization and trustlessness unless it’s too late. I think it’s inevitable though there will be a mix of products on the “centralized to decentralized spectrum” that collectively reach the masses. The onus should be on the user to be aware of tradeoffs going into the product.

More importantly, for a startup that faced unprecedent scaling issues and demand, it’s important to give kudos to Dapper. They’ve pushed the industry forward and reminded us all that in order to get mainstream adoption, build things that people want. I’m eagerly awaiting Dapper’s next big plans. Which team(s) will hit the consumer jackpot? Whether it’s from Dapper again or new builders on other L1s/L2s, I’ll be actively seeking out game-changing projects that can bring the space one step closer to mass adoption.